Luxembourg: Tax proposals in budget 2023, property tax reform

Budget 2023 includes several proposed tax measures

Budget 2023 includes several proposed tax measures

The Finance Minister on 12 October 2022 presented the 2023 budget which includes several proposed tax measures, including:

  • Extension of deadline for filing yearly tax returns from 31 March to 31 December for all individual tax, corporate and municipal business tax, and net wealth tax returns—effective FY 2022 for individual tax and corporate and municipal business tax returns, and FY 2023 for net wealth tax returns
  • Clarification of the so-called “reverse hybrid rules” to provide that the absence of taxation of income realized by an investor through a Luxembourg tax transparent entity or arrangement must be due to such difference in qualification (as opposed to a subjective tax exemption of such investor)—effective for 2022 tax year
  • Value added tax (VAT) amendments—effective 1 January 2023
    • Extension of reduced VAT rate of 8% to repairing of household appliances and to sale, rental, and repair of “electric bicycles”
    • Extension of super-reduced VAT rate of 3% to delivery of new photovoltaic installations for which the invoice is issued after 1 January 2023
  • Restriction of the accelerated depreciation regime on rental real property (as introduced by Budget Law 2021)—effective 1 January 2023
    • Reduction of the rate from 6% to 4%
    • Limitation to only up to two properties and only for buildings acquired or built after 31 December 2022

In addition, draft property tax reform legislation was filed on 10 October 2022 with the Luxembourg Parliament—aimed at addressing the increasing lack of housing in Luxembourg—which would revise current property tax rules and introduce two new taxes to discourage real estate speculation. If passed, the legislation would become effective after a period of two years. For example, if the legislation is approved in July 2023 (i.e., before the end of the current legislative term), the legislation would become effective September 2025 (with the new property taxes applicable starting in 2026 or later).

Next steps

Both the 2023 budget and the draft property tax reform legislation must go through the usual legislative process and may be subject to further amendments as a result of various consultations in the coming weeks.

Read an October 2022 report prepared by the KPMG member firm in Luxembourg


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